Greek Economy to Contract 4.5% This Year, Bank of Greece Says

Greece’s economy is expected to contract 4.5 percent this year and 0.5 percent in 2013, the country’s central bank said in its 2011-2012 Monetary Policy report.

“The fastest possible return of the economy to GDP growth is the key to achieving targets set” in the country’s second international financing package from the European Union and International Monetary Fund, the Athens-based Bank of Greece said in an e-mailed copy of the report released today. “It is estimated that during 2013 it’s possible for the economy to start to recover.”

Unemployment is seen at more than 19 percent this year, the report shows. Harmonized inflation is forecast at 1 percent for this year, with core deflation of about 0.1 percent, and 0.5 percent next year, with core deflation of 0.2 percent, according to the report.

Greece will need to adopt additional measures, with an emphasis on spending cuts, to achieve a sustainable reduction of its fiscal deficit and public debt, the central bank said.